I have a confession: I stole the title of this post from Liz Pulliam Weston. But I’ve been dying to tell you about this just in case you hadn’t thought of it that I had to find another article about it. I love talking with you about these things. But I also like finding additional information to point out to you. After all, I’m just a guy with an interest and an Internet connection. So I’m happy I found an article for you. And I like Liz Pulliam Weston a bunch, so I’m happy I found one by her, too. This isn’t the first time I’m giving Liz Pulliam Weston “shout out” here. I also wrote a few weeks back about her budget, or lack thereof.
Anyhow, let’s dig in.
A buddy of mine and I were talking recently about the mortgage market and starting playing around with some numbers (Yes, I know it’s sad that I play with mortgage calculators when I hang out with my buddies in my spare time…).
I run the numbers all the time, but he was surprised that rates had become so low that, if you’re able to qualify for a mortgage refinancing these days (not always an easy task) it was possible to shorten the term of your mortgage and end up with the same payment (or at least close).
For example, if you took out a $200,000 30-year-fixed mortgage seven years ago at 6.5% your monthly payment would be around $1,264.14 per month (not including taxes and insurance) and, after seven years your balance would be approximately $180,832.49. If you refinanced to a 15-year-fixed rate at 4% (about what the going rate is now if your credit is decent), your payment would rise by less than $75 per month – to approximately $1,337.60. So because of the lower interest rate you could cut eight years off of your term while only increasing your payment by less than $75.
Theresa and Bob Philby of Birdsboro, Pa., did even better, according to Ms. Weston:
The Philbys had been paying $970 a month on a 30-year, 6.15% loan that they took out eight years ago. Their new 15-year mortgage carries a 4.625% interest rate and a $990 monthly payment.
They cut off seven years of payments while only increasing their payment by $20 per month! Pretty cool, right?
And it looks like more people are looking into this according to the article – with 15-year terms progressively gaining popularity over the last few years and 30-year terms progressively losing popularity.
I know it’s tough to qualify for a mortgage these days, but if you were conservative when you bought, paid down for some time and maintain a high credit score, you might be pleasantly surprised.
So if you’re in the market for a refinance, ask your lender or mortgage broker to show you options for different fixed-rate terms – especially if you’ve been in the home for more than a handful of years. And, of course, put your credit card down and slowly step away from the mall!
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